An inventory typically comprises a group of goods, materials and articles known as parts. In operation, an order for one or more units of a part is filled from the inventory. Ideally, the number of units UI of each part in the inventory would be unlimited so every order could be filled from the inventory. However, typically the number of units UI of each part is limited by financial constraints. It is desirable to control the number of units UI of each part so the inventory does not exceed the financial constraints.
These financial constraints limit the number of units of each part in the following manner. Each part in an inventory has a corresponding cost C, the number of units in the inventory UI, and part investment PI. The part investment PI can be calculated as EQU PI=(UI)(C) (1)
Since each part has a corresponding part investment PI, an inventory investment II for an inventory having n parts can be calculated as ##EQU1## The inventory investment II of a typical inventory is constrained by a financial constraint referred to as an inventory investment constraint IIC. Thus, EQU II.ltoreq.IIC (3)
Since the inventory investment constraint IIC constrains the inventory investment II, it also constrains the part investment PI for each part and the number of units UI of each part in the inventory. As a result, only some orders are filled from the inventory at the time of the orders. These orders are referred to as fillable-from-stock orders FFSO.
An example of a typical inventory is illustrated in FIGS. 1A-C. With reference to FIG. 1A, an inventory 20 comprises parts A, B and C. A plurality of orders 22 for parts A, B and C include some fillable-from-stock orders FFSO. With reference to FIG. 1B, parts A, B and C completely fill the orders 22 which are fillable-from-stock FFSO orders and partially fill the remaining orders 22, thereby providing a plurality of order outputs 24.
The number of units UI of each part in an inventory is typically controlled by determining a minimum unit replenishment quantity MURQ and a safety unit quantity SUQ for each part using a typical inventory forecasting program such as GAINS, which is available from BSA Systems. When the number of units UI of a part in the inventory is less than or equal to the safety unit quantity SUQ, then at least the minimum unit replenishment quantity MURQ is ordered to restock the inventory. Thus, for example, in FIG. 1C a plurality of minimum unit replenishment quantities MURQ 26 will restock the number of units UI of parts A, B and C in the inventory.
The quantity ordered Q on any given day may differ from the minimum unit replenishment quantity MURQ depending on which of a variety of restocking techniques is used. Some typical restocking techniques include time-phased order point, material requirements planning, and reorder point. One known reorder point restocking technique is to order the quantity ordered Q when the number of units UI of a part in the inventory is less than or equal to the sum of the safety unit quantity SUQ for the part and a forecast unit demand over lead time FUDLT for the part, where the number of units UI of the part in the inventory may include in-transit units. The forecast unit demand over lead time FUDLT is a forecast of what the unit demand for the part will be before the inventory can be restocked. In this known technique, the quantity ordered Q for the part equals the sum of the safety unit quantity SUQ, the minimum unit replenishment quantity MURQ, and the forecast unit demand over lead time FUDLT for the part minus the number of units UI of the part in the inventory.
An inventory forecasting program such as GAINS uses information such as a monthly unit demand history, receiving or setup cost, inventory carrying cost, lead time, and an expected part service level PSL for each part to determine the minimum unit replenishment quantity MURQ and the safety unit quantity SUQ for each part. The expected part service level PSL for each part is an expected fraction of orders for the part which will be fillable-from-stock orders FFSO, and it can be approximated by an expected fraction of ordered units of the part which will be supplied from the inventory. Thus, ##EQU2## where O is the number of orders for the part. In general, a higher expected part service level PSL for a part results in a higher minimum unit replenishment quantity MURQ and safety unit quantity SUQ for that part.
Because the minimum unit replenishment quantity MURQ for each part in an inventory increases the number of units UI of the part in the inventory, it also increases the part investment PI for that part, as can be seen from equation (1) above. Since the part investment PI for each part is constrained by the inventory investment constraint IIC, the minimum unit replenishment quantity MURQ and therefore the expected part service level PSL for each part are also constrained by the inventory investment constraint IIC.
Accordingly, known methods are used for selecting which parts will have higher expected part service levels PSL than others. In one known method, parts are grouped according to a subjective evaluation of their importance. Using this method, for example, parts designated X, Y and Z might be evaluated as having high, medium and low importance, respectively. The expected part service level PSL of X parts would then be higher than the expected part service level of Y parts or Z parts. Similarly, the expected part service level PSL of Y parts would be higher than the expected part service level of Z parts.
It is known that these conventional methods are problematic. Orders for some parts tend to be arbitrarily frequent fillable-from-stock orders FFSO, while orders for other parts are arbitrarily infrequent fillable-from-stock orders FFSO. Known methods are also problematic because they are time, labor, and cost-intensive. Therefore, there is a need in the art for an improved system and method for controlling the number of units UI of parts in an inventory which are less arbitrary. There is also a need for an improved system and method which are more efficient with time, labor, and cost.
Advantages and novel features of the invention will be set forth in part in the description which follows, and in part will become apparent to those skilled in the art upon examination of the following or may be learned by practice of the invention. The advantages of the invention may be realized and obtained by means of the instrumentalities and combinations particularly pointed out in the appended claims.